Intense Trade Disputes are Undermining the World Economy, New IMF Chief

The new International Monetary Fund (IMF) chief, Kristalina Georgieva said on Tuesday that intense trade disputes are undermining the world economy, which is expected to be the slowest in nearly a decade.

Research shows the impact of the trade conflict is widespread and countries must be ready to respond in unison with cash infusions, also called for a ramp-up in carbon taxes to address the other challenge facing the global economy: climate change, Kristalina Georgieva said in her first speech as managing director of the International Monetary Fund.

“In 2019, we expect slower growth in nearly 90 percent of the world. The global economy is now in a synchronized slowdown, this widespread deceleration means that growth this year will fall to its lowest rate since the beginning of the decade” Georgieva said in a speech ahead of IMF-World Bank autumn meetings next week.

She said the IMF is cutting its forecasts for growth this year and next. Previously, the world economy had been projected to expand by 3.2 percent in 2019 and 3.5 percent in 2020. The fund is due to release details in its updated World Economic Outlook on October 15.

For the global economy, the cumulative effect of trade conflicts could mean a loss of around $700 billion by 2020, or about 0.8 percent of GDP, she said, which is far higher than the fund previously forecast as its worst-case scenario.

IMF research shows the secondary effects of the trade war such as the loss of confidence and financial market reactions are far greater than the direct economic impact of the tariffs.

She warned that “once undermined, confidence is hard to rebuild, We are already shooting ourselves in the foot.”